Flashcards in Chapter 19: Job Order Cost Accounting Deck (56):
What is a cost accounting system?
Records manufacturing activities using a perpetual inventory system, which continuously updates records for costs of materials, goods in process, and finished goods inventories.
What does a cost accounting system provide?
Timely information about inventories and manufacturing costs per unit of product.
What is a general accounting system?
Records manufacturing activities using a periodic inventory system.
What is a job order production (job order manufacturing?)
When each customized product is manufactured separately, which is the production of products in response to special orders.
What is a job lot?
When a job involves producing more than one unit of a custom product.
What are examples of job lots?
Benches for a church, imprinted T-shirts for a 10K race or company picnic, or advertising signs for a chain of stores. The volume of production is typically low, such as 50 benches, 200 T-shirts, or 100 signs.
What are the steps for jobs produced on speculation?
1. Predict the cost to complete the job. This cost depends on the product design prepared by either the customer or the producer.
2. Negotiate price and decide whether to pursue the job. Other than for government or other cost-plus contracts, the selling rice is determined by market factors. Producers evaluate the market price, compare it to cost, and determine whether the profit on the job is reasonable. If the profit is not reasonable, the producer would determine a design target cost.
3. Schedule production of the job. This must meet the customer's needs and fit within the company's own production constraints. Preparation of this work schedule should consider work-place facilities including equipment, personnel, and supplies. Once this schedule is complete, the producer can place orders for raw materials. Production occurs as materials and labor are applied to the job.
What is job order cost accounting system?
To determine the cost of producing each job or job lot. In the case of a job lot, the system must include separate records for each job to accomplish this and it must capture information about costs incurred and charge these costs to each job.
What is a job cost sheet?
A separate record maintained for each job. It identifies the customer, the job number assigned, the product, and key dates. Costs incurred on the jobs are immediately recorded on this sheet. When each job is complete, the supervisor enters the date of completion, records any remarks, and signs the sheet.
What are Goods in Process Inventory?
Where accumulated costs are kept while a job is being produced. The collection of job cost sheets for all jobs in process makes up a subsidiary ledger controlled by the Goods in Process Inventory account in the general ledger. Managers use job cost sheets to monitor costs incurred to date and to predict and control costs for each job.
What is finished goods inventory?
When a job is finished, its job cost sheet is completed and moved from the jobs in process file to the finished jobs file. This latter file acts as a subsidiary ledger controlled by the finished goods inventory account.
What does an employee do when materials are first received from suppliers?
They count and inspect them and record the items' quantity and cost on a receiving report. The receiving report serves as the source document for recording materials received in both a materials ledger card and in the general ledger.
What are materials ledger cards (or files)?
A job order cost systems which are perpetual records that are updated each time units are purchased and each time units are issued for use in production.
Road Warriors acquired $450 of wiring and related materials. How is this recorded?
Raw Materials Inventory (Debit) $450
Accounts Payable (Credit) $450
The use of alarm system wiring on Job B15 yields the following entry. How is this recorded?
Goods in Process Inventory (Debit) $225
Raw Materials Inventory (Credit) $225
What is the flow of labor costs?
Using clock cards and the Factory Payroll account to subsidiary records of the job order cost accounting system.
What's the purpose of costs in subsidiary records?
Gives detailed information needed to manage and control operations.
What are clock cards?
Employees commonly use these cards to record the number of hours worked, and they service as source documents for entries to record labor costs.
According to a clock card data, workers earned $1,500 for the week ended. How is this recorded?
Factory Payroll (Debited) $1,500
Cash (Credited) $1,500
When is a cost recorded as direct labor?
When time tickets report labor used on a specific job.
How do you record data from a time ticket?
Goods in Process Inventory (Debit) $60
Factory Payroll (Credit) $60
If factory overhead is over applied, then the adjusting journal entry to close the factory overhead account includes:
Factory Overhead (Debit) COGS (Credit)
What products are most likely to be manufactured as a job, rather than as a job lot?
Tailored wedding dress and customized home.
Events in which they occur in job order costing?
1. Customer ordered received
2.Cost to complete the job predicted
3. Price negotiated
4. Production of job scheduled and raw materials ordered
5. Materials, labor, and OH added to job
6. Job completed and delivered to customer
Job cost sheets can be used to
1. monitor costs incurred to date and to predict and control costs for each job
2. provide a permanent record for the COGS account
3. provide a subsidiary ledger for the Finished Goods Inventory account
During production, job cost sheets are used to?
1. provide a subsidiary ledger for the Goods in Process Inventory account.
2. monitor costs incurred to date and to predict and control costs for each job
A company incurs factory overhead costs of $1,200 and applied $1,500. If the difference is considered immaterial, then the:
Factory OH account has a credit balance of $300 before adjusting.
Adjusting entry will require a credit a COGS.
Order when recording direct material costs in job order cost accounting?
1. Receiving reports
2. Materials ledger cards
3. Materials requisitions
4. Job cost sheets
The journal entry to record the purchase of materials on account is?
Increase in assets and an increase in liabilities.
Receiving reports are used in job order cost accounting to record the cost and quantity of materials.
Delivered from supplies
How do you record the use of direct materials in production?
Debit Goods in Process Inventory
Credit Raw Materials Inventory
What is the flow of labor costs from clock cards and the Factory Payroll account to subsidiary records of the job order cost accounting system.
1. Clock cards
2. Factory Payroll
3. Time Tickets
4. Job Costs Sheets
What do costs in subsidiary records give details about?
Information needed to manage and control operations
What the Factory OH cost flows?
1. Materials Requisitions
2. Time tickets
4. Adjusting Entries
5. Factory OH
6. Pre-determined OH rate
7. Job Cost Sheets
What does Factory OH include?
All production costs other than direct materials and direct labor.
What are two sources of overhead costs? Where are they recorded from?
Indirect materials and indirect labor.
Requisitions for indirect materials and time tickets for indirect labor.
Other sources of OH are?
Vouchers authorizing payments for items such as suppliers or utilities and adjusting entries for costs such as depreciation on factory assets.
How would you record OH?
Factory OH (D)
Accumulated Depreciation (C)
Factory OH (D)
Utilities Payable (C)
What is the allocation base?
The factor to which overhead costs are linked.
How does the cost of individual jobs impact a manager's decision ?
Affects pricing and performance evaluation.
What is predetermmined OH rate?
Estimated OH costs/estimated activity base
Journal entries for charging goods in process inventory?
1. Direct materials requisitions
2. Direct labor time tickets
3. Factory overhead
How is factory overhead t-account recorded?
Company applies overheaad using a predetemined rate estimated at the beginning of the period. At the end of the period, the company receives bills for its actual overhead costs.
When the underapplied overhead amount is immaterial, it is allocated (closed) to the COGS account with the following adjusting entry.
Factor OH (C)
Is job order costing applicable to service setting?
The payment of production labor will result in?
Decrease in assets and a decrease in equity.
The journal entry to record direct labor in production?
Increase in assets and an increase in equity.
What are the source documents for each?
1. Indirect materials
2. Indirect Labor
3. Factory utilities
4. Depreciation on factory equipment
1. Requisition forms
2. Time tickets
3. Vouchers authorizing payment
4. Adjusting entries
If factory overhead is overapplied, then the adjusting journal entry to close the factory overhead includes?
Factory OH (D)
Requisitions are used in job order cost accounting to record the cost and quantity of
Both direct and indirect materials requested by the production department.
The allocation of factory OH is?
Increase in assets and an increase in equity.
Managers use a predetermined OH rate for which of the following reasons?
To estimate total job costs before the job is completed and to assist managers in setting prices for jobs.
Match the following activities to their affect on the general ledger accounts?
1. Alllocate OH costs to jobs
2. Pay factory utilities
3. Purchase indirect materials
4. Use indirect materials
5. Incur direct labor
6. Pay wages
1. Credit Factory OH
2. Debit Factory OH
3. Debit Raw Materials Inventory
4. Credit Raw Materials Inventory
5. Credit Factory Payroll
6. Debit Factory Payroll
If factory OH is overapplied, then?
Applied OH costs> actual OH costs
The factory OH account has a credit balance
Time tickets are used in job order cost accounting to record the time and cost of?
both direct and indirect labor in the production department.